UP sugar mills to get booster shot of Rs 3,200 cr

Centre had announced a soft loan scheme of Rs 6,000 cr to beleaguered sugar industry

The Rs 6,800 crore cane arrears of private sugar mills in Uttar Pradesh are likely to be halved through a state relief package of Rs 2,100 crore coupled with a soft loan from the Centre of Rs 1,200 crore. The stock market has reacted positively to the news and sugar companies’ share prices were up on Wednesday in a falling market.

The Centre has announced soft loans of Rs 6,000 crore to the beleaguered sugar industry, of which Rs 1,200 crore is likely to be available to UP’s 94 private mills.

Besides, the state government has announced a financial package of Rs 2,100 crore to help private millers pay cane farmers. The package was first announced on November 12, 2014, at the start of the 2014-15 crushing season. At a meeting yesterday the state government took a formal decision on the issue.

The government announced incentives totaling Rs 40 per quintal, which effectively reduces the price of cane to Rs 240 a quintal. The incentives will be provided in tranches.

The state government will waive the cane societies commission (Rs 6.60/quintal), the cane purchase tax (Rs 2/quintal) and the sugar entry tax (Rs 2.80/quintal). Another Rs 8.60 per quintal will be provided at the end of the crushing season.

For the remaining Rs 20 per quintal, a committee was set up to consider the average price of sugar and byproducts between October 2014 and May 2015 with fixed floor price of sugar (Rs 3,100/quintal), molasses (Rs 390/quintal), bagasse (Rs 167/quintal) and press mud (Rs 26/quintal). The mills are to be paid if average prices fall below these floors.

The process of providing the remaining component of Rs 28.60 per quintal is on and is likely to be completed within the next two weeks, according to industry sources. The incentives together with the soft loan will reduce the private mills’ arrears to Rs 3,500 crore, excluding interest.

According to sources, the private millers are also trying to settle arrears through their own resources, which could total Rs 700-800 crore. This would, however, still leave cane dues of Rs 2,800 crore when the next crushing season starts in November.

UP Sugar Mills Association Secretary Deepak Guptara said the industry was hopeful the state government would evolve a “long term solution” to the problem that afflicted the sector every year.